New Delhi: The rural economic landscape of India has emerged as a pivotal force driving economic expansion, surpassing urban regions in growth rates, largely attributed to a notable increase in government expenditure in recent quarters, as delineated in a report by Anand Rathi, a financial service provider.
"The rural sector continues to exhibit a growth trajectory that outpaces urban areas, primarily due to a significant escalation in government spending within rural locales over the past quarter," the report elucidates.
Looking ahead, the report anticipates that the growth momentum within the rural economy will persist, albeit with a potential moderation. It further posits that favorable monsoon conditions and enhanced sowing data are poised to maintain the upward momentum in rural demand, thereby serving as a safeguard against potential economic uncertainties.
"We project a moderation in growth post-elections, yet the favorable monsoon conditions and improved sowing data are expected to sustain the upward trend in rural demand," the report states.
Furthermore, the report underscores the government's ambitious capital expenditure plans, totaling Rs 11.1 trillion, which are anticipated to catalyze infrastructure development, thereby augmenting rural economic prospects.
The significance of the rural economy in the nation's development cannot be overstated, given that a majority of the populace resides in rural settings. According to the Economic Survey of 2022-2023, approximately 65 percent of India's population was rural in 2021.
Moreover, the report highlights India's distinction among emerging economies, attributed to its robust GDP growth. Last year, India achieved a growth rate exceeding 8 percent, and the Reserve Bank of India (RBI) forecasts a growth rate of 7.2 percent for the fiscal year 2025. The financial outlook appears optimistic, with a concerted effort to reduce the fiscal deficit to 4.5 percent.
Additionally, the report suggests that India's credit rating could improve, owing to robust tax revenues and a substantial dividend from the RBI, which could lead to a fiscal deficit lower than initially anticipated, potentially resulting in an enhanced sovereign rating.
"The fiscal outlook appears promising, with a continued focus on reducing the fiscal deficit towards the 4.5 percent target. Strong tax collections and a substantial RBI dividend may enable the fiscal deficit to come in lower than expected, which could potentially lead to an improved sovereign rating," the report concludes.
